Stocks rise on Japanese nuclear hopes

A trader scurries across the floor of the New York Stock Exchange at the closing bell, Friday, March 18, 2011. (AP Photo)

LONDON — Hopes that Japan is making progress in its battle to control radiation leaks at a nuclear plant gave stocks a boost Monday, despite renewed oil price rises following military action against the regime of Libyan leader Moammar Gadhafi.

The improvement in risk appetite was most evident in equities, where most indexes around the world posted solid gains at the start of the week likely to be dominated once again by developments in Japan and Libya.

"While these developments have contrasting influences on markets, participants are for the most part focusing on an easing in Japanese concerns," said Nick Bennenbroek, an analyst at Wells Fargo Bank.

Investors' appetite for riskier trades, such as stocks, has been weighed down in recent weeks by the confluence of alarming events around the world. On top of Japan's massive earthquake and subsequent tsunami, investors had to grapple with the potential implications of a nuclear meltdown at the Fukushima nuclear complex.

The hope now is that the Japanese authorities are gaining some control of the dangerously overheated reactors following near-constant water dousing. Prime Minister Naoto Kan noted "light at the end of the tunnel" in regard to the challenges at Fukushima, and U.S. regulators said containment structures in three of the reactors were holding up.

The crisis was far from over amid fears over food and water contamination, but investors were clearly relieved that a worst case scenario could be avoided.

Though Japanese markets were closed for a national holiday, most Asian markets advanced. The buying followed on into the European and U.S. sessions, with sentiment further buoyed by news that AT&T Inc. is planning to buy T-Mobile USA from Deutsche Telekom AG in a cash-and-stock deal valued at $39 billion.

In Europe, the FTSE 100 index of leading British shares closed up 1.2 percent at 5,786.09 while Germany's DAX rose 2.3 percent to 6,816.12. The CAC-40 in France ended 2.5 percent higher at 3,904.45.

In the U.S., the Dow Jones industrial average was up 1.7 percent at 12,055 around midday New York time while the broader Standard & Poor's 500 index rose 1.5 percent to 1,299.

The other main focus in the markets was Libya after coalition forces, including those from the U.S., Britain and France, launched a second wave of strikes to protect civilians from government troops and to enforce a no-fly zone.

The prospect of a longer shutdown in oil production in Libya, which accounts for a little under 2 percent of global crude supplies, caused oil prices to spike higher. A barrel of crude as traded on the New York Mercantile Exchange was up $1.52 at $103.37 while the equivalent Brent rate in London rose $1.52 a barrel to $115.29.

In the currency markets, traders remained reluctant to push the yen higher after last week's decision by the Group of Seven leading industrial countries to intervene in the markets to rein in the export-sapping appreciation of the currency. Last Thursday, the yen rose to an all-time high against the dollar as the currency garnered support from its widely perceived status as a safe haven and as investors repatriated money to pay for reconstruction efforts back home.

By late-afternoon London time, the dollar was up 0.3 percent on the day at 81.04 yen, over 4 yen higher than last week's low of 76.53 yen.

Last week's intervention — the first of its type since 2000 — has also been credited for the more generally stable tone across all financial markets.

"While it is still early days, one can tentatively conclude that coordinated intervention is successfully achieving its initial objectives to restore stability to the yen and broader financial markets helping to limit the negative fallout," said Lee Hardman, currency economist at The Bank of Tokyo-Mitsubishi UFJ.

Meanwhile, the euro was firm as rate-setters at the European Central Bank, including its president Jean-Claude Trichet, indicated that they remained on course to raise interest rates at the next policy meeting on April 7.

Trichet told European parliamentary deputies that "inflation in the euro area is on the rise" and "the risks to prices are on the upside."

The currency has been buoyant of late amid hopes that EU leaders will this week announce a "comprehensive solution" to the debt crisis that has afflicted the single currency zone for the past year. It was trading up 0.1 percent at $1.4188.

Earlier in Asia, Hong Kong's Hang Seng index rose 1.7 percent to 22,685.22, unaffected by an announcement Friday that the People's Bank of China would raise the bank reserve requirement ratio by half a percentage point on March 25. The hike, the third this year and intended to cool lending and inflation, did not rattle markets.

Chinese shares performed less impressively, with the benchmark Shanghai Composite closing 0.3 percent higher at 2,909.1.

South Korea's Kospi index was up 1.1 percent to 2,003.42 and Australia's S&P/ASX 200 gained 0.4 percent to 4,642.80.